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Talking Points:

  • Japan business sentiment surveys came out as the weakest since Q3 2017
  • USD/JPY fell in the aftermath, closely following declines in the Nikkei 225
  • Looking ahead, the Yen could be left vulnerable to US tariff retaliations

See how the Japanese Yen is viewed by the trading community at the DailyFX Sentiment Page.

USD/JPY dropped as Japan's business sentiment index (BSI) for all industries came in at 3.3 for this year’s first quarter, which was lower than 6.2 in Q4 2017. The BSI reading for manufacturing was 2.9 in Q1 2018, which was well below the 9.7 print from the last period. Both readings were the lowest since the third quarter of 2017.

Soon after the data crossed the wires, the anti-risk Japanese Yen was left vulnerable to risk trends. It fell further when the Nikkei 225 declined immediately after market open. USD/JPY then continued closely tracing the index as it swung between gains and losses.

Sentiment seemed to be what traders were more focused on due to the data’s limited implication for Bank of Japan monetary policy. With that in mind, a lack of key domestic economic releases could leave the Japanese unit vulnerable to external factors. As Senior Currency Strategist Ilya Spivak implied,retaliation to the US tariff hike could disrupt what could be calmer waters ahead.

USD/JPY Fell On Soft BSI Surveys, Tracing Nikkei After Tokyo Open